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October 1, 2024 - 4:15pm
With production cuts and escalating conflict in the Middle East failing to move oil prices anywhere near Saudi Arabia’s target price of $100 a barrel, the kingdom decided last week to open the spigots to capture market share. Oil prices then fell to around $67 a barrel, well below the initial target of $100. And while reports of an imminent Iranian missile attack on Israel sent prices bouncing off their lows this Tuesday, even that surge left the price some $30 shy of the target.
Western governments will accept the news gratefully. Lower oil prices will provide welcome relief to energy-importing European economies, while giving consumers everywhere a bit more pocket money. Meanwhile, with a growing number of politicians calling for renewable energy targets to be scrapped, lower fuel prices may provide a fillip to Western carmakers, who have been struggling to keep up with the Chinese competition in the production of cheap, high-quality EVs.
For his part, Donald Trump says that if elected, he’ll go further yet to take advantage of falling fuel prices. With plans to not just slow but completely scrap the energy transition programme begun by Joe Biden, he aims to exploit America’s “energy abundance” to pivot back to a carbon-based economy. He wants to restore US manufacturing prowess on the basis of cheap electricity using existing technology.
Still, the irony is that cheap fuel may make it harder for Trump to win the election, to the extent that falling gas prices will bolster Kamala Harris’s pitch. There are risks for Western governments in sticking with their existing advantages in the production of “legacy goods” such as ICE automobiles. Part of the reason why oil prices have been stagnating is that a weak global economy has constrained cyclical demand. But it may also be that structural demand is falling because the energy transition, which is proceeding faster than expected in China, may now be advancing into other countries as well.
Global oil production peaked in 2018, and has never returned to that year’s levels. At one time, falling output would have ultimately led to price rises. But other than a spike caused by supply-chain disruptions during the Covid-19 pandemic, world oil prices have bumped around pretty much where they were back in 2018.
Saudi Arabia’s own future plans illustrate how we may be moving into a post-carbon age. Part of the US aim in turning itself into the world’s leading oil and gas producer, something which began under Barack Obama and peaked under Biden, was to reduce the country’s chronic vulnerability to events in the Middle East. In a strange sort of way, the US succeeded too well. With North American markets mattering ever less to the Gulf states, they now look for partners elsewhere.
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SubscribeI’m always dumbfounded how little these net zero types know about the very topic they tirelessly promote. Renewable energy is not a threat to the fossil fuel industry. Nuclear power could become a threat in the future, but no one is building nuclear in a meaningful way today.
Norway is once again used as an example of an oil producing country moving towards renewable energy. The author is seemingly oblivious to the fact that 94% of its renewable energy comes from hydro dams. Does the author seriously think the desert nation of Saudia Arabia is about to build a bunch of hydroelectric dams? I suppose SA could build a bunch of solar plants, but if this was a viable option we would see some real-world examples by now.
Anyone who thinks EVs will replace traditional vehicles is clearly out of touch. EV sales are dropping like a rock and car manufacturers are shifting production lines away from EVs because they are taking a bloodbath. Govt subsidies distorted the market for a few years, but this not a sustainable economic strategy.
This idea of an energy transition is silly and uninformed. Fossil fuel production made up 80% of the global energy mix 20 years ago. It still makes up 80% of the global energy mix today, despite the trillions invested in wind and solar.
Saudi Arabia is constructing the World’s largest Solar Power Station
Not a solar farm
Horses for courses
Norway for Hydro
Saudi for Solar
Or Perhaps Geography
Sure. Solar makes sense for them, but it isn’t reliable like wind. You still need back up power and lots of it.
Correct Jim.
Gas does not compete with wind and solar. It competes with coal, oil and nuclear.
More intermittency in the grid from wind and solar means that more gas is required, not less
Given the inefficiency of wind and solar, I wouldn’t say trillions “invested in” but more like “granted to”
I’m always dumbfounded how little these net zero types know about the very topic they tirelessly promote. Renewable energy is not a threat to the fossil fuel industry. Nuclear power could become a threat in the future, but no one is building nuclear in a meaningful way today.
Norway is once again used as an example of an oil producing country moving towards renewable energy. The author is seemingly oblivious to the fact the 94% of its renewable energy comes from hydro dams. Does the author seriously think the desert nation of Saudia Arabia is about to build a bunch of hydroelectric dams? I suppose SA could build a bunch of solar plants, but if this was a viable option we would see some real-world examples of this.
Anyone who thinks EVs will replace traditional vehicles is clearly out of touch. EV sales are dropping like a rock and car manufacturers are shifting production lines away from EVs because they are taking a bloodbath. Govt subsidies distorted the market for a few years, but this is not a sustainable economic strategy.
This idea of an energy transition is silly and uninformed. Fossil fuel production made up 80% of the global energy mix 20 years ago. It still makes up 80% of the global energy mix today, despite the trillions invested in wind and solar.
I’m not sure oil is a good commodity to generalise “the West”. Europe and Japan are in a very different position so far as oil is concerned than the US. The US has ample oil – not all the weights its refineries are geared to; it especially needs heavy oil, which is available from Venezuela or Russia. Currently, Russia is supplying those requirements(sanctions do not apply to items the US needs), and the Russians are notorious for sticking to their side of a bargain never mind the political winds.
The challenge of renewables – the most important of which are now wind and solar – is that they are capricious, and the grid stability (both quantity and quality) on which our economies depend is only achievable with highly flexible gas-fired generation.
Personally, I very much doubt that all the technical and practical issues have been thought through. Ideological purity is no substitute for engineering.
Plenty of heavy oil in western Canada. 4.3M barrels per day.
My comment not being posted. Very, very frustrating.
What did it say?
Oh, I know the feeling. I am so fed up with The UnHerd’s moderation policy that am now completely demotivated to comment and, when my annual subscription expires, am not going to renew it.
Of all other numerous online publications I am subscribed to (and all the social media I am active on), it is only UnHerd that removes comments, even the most innocuous ones. And they keep the comments removed for such a long time that it becomes completely pointless to post anything.
I have had long correspondence with the UnHerd, including sending a couple of mails to Freddie Sayers, but apparently they are adamant in their ways and believe that thus they will attract more subscribers and more clicks.
Sad…
It’s an interesting thesis, but at the end of the day, if governments’ energy policy focused on the delivery of energy, not ham-fisted attempts to drag the future into the present by regulation and subsidy, then the markets could be left to decide how many vehicles and of what fuel type would be produced according to the needs of the economy. This would as much as possible eliminate waste and uncertainty, and deliver both energy and the necessary vehicles. That would require trusting people to know what kind of vehicles they need, and allow them to choose accordingly.
Of of course free market capitalism might be a poor tool to deliver goods and prosperity, and the utter failure of communism and central planning a mere accident, historical bad luck.
The progressive member of parliament from my jurisdiction asked me how they can make a market for green energy and EVs. So I told her. Keep on propagandizing on the virtue of EVs and green energy and drop the tax rate on people who pay taxes. They will have money in their pockets and they will buy goods which make them look good. You know instead of helping the poor and their society. Then I asked her if that sounds like something government should be doing. She doesn’t talk to me any longer. And if you’re wondering, it’s heather mcpherson. Of note she also successfully negotiated peace in the Middle East this year.
While oil is cheap, using it makes perfect sense.
This is a dumb analyses. Oil demand is down in part because China’s economy is rapidly slowing, with high unemployment and a rapidly aging population, and because Russia – a gas station with an army attached – has the spigots wide open, as does Venezuela.
Thermodynamics being laws, as they are, state that energy can’t be created, nor destroyed, with the exception of nuclear fission.
The most efficient and powerful energy source known to man, then, is a 42 gallon barrel of Brent Sweet Crude. All of humanity’s advances in the last century and a half, which have been historic, derive directly from “fossil fuels.” Not from solar panels, which are a decades old technology, nor from windmills, which are older than a millennia.
Throwing fossil fuels away and ruining our economy for a faraway conjecture (based on the math models of leftist academia) is, simply put, asinine.
People don’t die because they’re warm and well fed. People die when they’re cold and hungry.
But remember, they don’t really like people.